Here is the typical fee structure of an invoice discounting facility. The fee's listed below are those you can expect to pay beyond your normal factor rate.
Most lenders will charge you a nominal initiation fee to get your invoice facility up and running.
Some lenders will charge a fee beyond your normal factor rate. This will likely be proportional to your loan amount.
In some cases, should the invoice against which you have taken out a facility be paid early, the lender may apply an early-settlement fee. Avoid lenders who do this if your client does pay early on occasion.
Is an invoice discounting facility right for your business?
Here are some details which will help you decide whether to take out that invoice factoring facility.
R10k to R5M
R500k to R5M
Speed of Funding
As little as 24 hrs
Often hidden fee's
No collateral required
Early Settlement Penalties
Discounts for early settlement
Often penalties for early settlement
Flexible. Pay as you earn options.
Merchant Cash Advance
Traditional Bank Loan
R10k to R5M
Speed of funding application
As fast as 24 hours
Weeks to months
Business with a card machine
Business that owns a property
No discounts because total loan cost is fixed
Often penalties for early repayment
You repay proportionally to your earnings. No income = no repayment.
Inflexible repayment structure. Normally over longer-terms.